Job Sharing and Employment

Abstract

In macroeconomic assessments, it is typically concluded that reducing general working hours would not have overall employment effects once the economy has adjusted to a new equilibrium. However, the ultimate employment effects of reducing working hours depend on numerous structural and microeconomic factors within the economy, as well as the practical implementation of working hour reductions. A key prerequisite for positive employment effects is the extension of operating and service hours as general working hours are reduced, which allows companies to utilize their existing capital stock more efficiently, prevent increases in unit labor costs, and maintain their previous level of production.

When explaining differences in unemployment rates among OECD countries in the 1980s and 1990s, working hours do not play a role if other institutional factors affecting unemployment (such as the level and duration of unemployment benefits, the structure of the negotiation system, and the extent of active labor market policies) are controlled for. This result strongly supports the view that reducing general working hours is not a solution to high unemployment in Europe.

The approach of reducing general working hours to improve employment appears to have lost popularity in Europe compared to the 1980s. Recent studies by the Bank of France and the OFCE research institute suggest that France’s unemployment problem could somewhat ease with the move to a 35-hour workweek. However, it is challenging to assess the employment effects of reducing working hours in advance. According to prevailing opinions, positive employment effects have mainly been achieved in Germany, where working hours have been systematically reduced since the early 1980s, led by the metal industry. The emergence of employment effects has depended on the adoption of more flexible working hours, which has allowed for the extension of operating and service hours as general working hours are shortened. However, for Germany, the positive employment effects of reducing general working hours are also controversial, especially when examining developments in the 1990s. In discussing Germany’s labor time policy experiences, it is important to emphasize the significance of local agreements in situations where a company faces an acute profitability crisis. A well-known example of local agreements is Volkswagen’s agreement with its employees in 1994. The agreement, which included a reduction in weekly working hours, helped preserve thousands of jobs that would likely have otherwise been permanently lost. The key advantage of local, voluntary agreements is that they do not create bottlenecks (in terms of profession and education) as easily in the labor market compared to reducing general working hours through legislation across the entire economy. In Denmark, on the other hand, there has been a strong shift towards a more selective labor time policy, with efforts primarily focusing on developing sabbatical leave arrangements. However, sabbatical leave experimentation has not gained widespread popularity in Denmark. This is mainly because those on sabbatical leave are exposed to a risk of unemployment in the private sector.

• ISSN: 1236-7184
• ISBN: 952-5071-21-9
• Publication in PDF-format